HMRC has reminded employers to comply with workplace nursery tax rules to avoid exploiting the tax exemption. While most schemes meet the requirements, some operators falsely advertise HMRC approval without meeting partnership criteria.
The tax exemption, introduced in 1990, supports employers providing nursery places for employees' children. Partnership requirements help smaller employers offer childcare support by collaborating with others.
Employers can have multiple nursery partnerships, but all must meet the same criteria. This benefit is typically provided through a salary sacrifice arrangement, usually taxable, but workplace nurseries are exempt.
HMRC has issued a warning after finding some companies misusing the scheme for tax advantages. Employers must partner with a commercial nursery provider while maintaining responsibility for financing and managing the childcare. They must accept significant financial responsibility and influence management decisions, such as staff performance, care conditions, and place allocation.
If an employee with a child is appointed to the nursery's management board, they must be genuinely empowered to act for their employer and actively participate in liaising with the employer, coordinating with parents, and following up on action points.
Employers must ensure they adhere to these rules to avoid penalties and maintain the integrity of the tax exemption.
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